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June 2012 Jim Ellerton, Chairman and Founder
AIM: SER
2
This presentation is for information only and does not constitute or form part of any offer or invitation to sell, issue, purchase or subscribe for (or any solicitation of any offer to purchase or subscribe for) the securities described herein in any jurisdiction. No reliance may be placed for any purposes whatsoever on the information contained herein or in its completeness. All investments are subject to risk. The value of the securities, if and when offered, may go down as well as up. Past performance is no guarantee of future returns. No representation or warranty, express or implied, is given by the Company or any of their subsidiaries or any of their respective advisers, officers, employers, employees, or agents, as to the accuracy, fairness or completeness of the information or opinions contained in this document or expressed in the presentation and no liability is accepted for any such information or opinions (which should not be relied upon) or for any loss howsoever arising, directly or indirectly, from any use of this document or its contents or information expressed in the presentation. This presentation contain certain “forward-looking statements”, including without limitation, expectations, beliefs, plans and objectives regarding the potential transactions and ventures discussed in this release. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are the risks inherent in minerals exploration, the need to obtain additional financing, the availability of needed personnel and equipment for future exploration and development, fluctuations in the prices of commodities, and general economic conditions.
Directors
Jim Ellerton – Chairman of the Board, Sefton Mr. Ellerton has over 30 years of multi-discipline experience in the development and evaluation of oil and gas prospects throughout the major basins of North America. He has major oil company background (Texaco) and independent company start-up and management experience, and is one of the original founders of Sefton Resources.
Karl F. Arleth – Non-executive Director, Sefton Mr. Arleth comes to Sefton from Blue River Resources LLC, a Denver-based private oil and gas start-up firm engaged in the acquisition and development of U.S. producing properties. He has over 30-years of domestic and international oil and gas experience, including 22 years at Amoco and BP.
Mark R. Smith – Non-executive Director, Sefton Mr. Smith currently is sole practitioner of law at Mark R. Smith PC in Calgary, Alberta Canada and has been involved in the energy industry for over 20 years. He has in-depth knowledge of securities law, mergers and acquisitions and oil and gas transactional law and serves on a number of boards and subcommittees of both private and public entities.
*We will be adding additional non-executive Directors
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Company Overview
London Stock Exchange AIM Code: SER.L
Shares Outstanding: 512 MM (30/6/12)
Management Ownership: 10.0% (approximately)
YTD H/L: 4.75p / 1.6p
Market Cap. / EV1: £10 MM / £14 MM
3-Month Average Daily Volume2: 10,000,000 shares/day
2012 Current Production: 160 BOPD 100% Oil
Core Areas: California / Kansas
Acreage Gross / Net: 51,772 / 51,772
Proved Reserves (31/12/11): 3.8 MMBO (100% oil / 44% PD) $138 MM PV-10 @ $102/Bbl
Prospective Contingent & 1.97MMBO + 55.78 BCF
Possible Resources $140MM PV-10 @ $95/bbl and $2.50/mcf
Potential Pipeline Value $24MM PV-10 @ $1.25/mcf
Fiscal Year End: 31 December
Oil & Natural Gas
Heavy / Medium Crude Oil
Ventura Basin 100% WI / 90% NRI
Forest City Basin
100% WI / 87.5% NRI
Denver HQ
CA
CO
KS
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1 EV = Enterprise Value (Debt + Equity) – at 2p/share 2 Source: yahoofinance.com
Our Strategy
• Acquire long life, partially developed reserves with controlling interest
• Favor shallow reserves with good access to market and infrastructure
• Politically stable environment with a minimum Internal Rate of Return (IRR) of 30%+
• Acquire core assets towards the bottom of the commodity price cycle
• Develop core assets with own funds, operate and retain high WI%
• At an appropriate time, leverage remaining growth potential using third party capital
• Accelerate growth through acquisitions
• Maximize shareholder value through asset disposals and/or farm-outs at the top of the commodity cycle or through merger
• Keep investors informed through a strong Investor Relations program
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Group Financial Overview
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2011 2010 2009 2008 2007
Oil and gas sales (net of royal1es) $3,869,905 $3,622,049 $2,739,282 $4,688,183 $2,977,691
Interest and other income $652 $3,726 -‐-‐ $390,000 $417
Opera1ng expense ($965,816) ($795,950) ($617,042) ($1,040,573) ($672,845)
Net from oil & gas $2,904,741 $2,829,825 $2,122,240 $4,037,610 $2,305,263
General and administra1ve ($1,995,337) ($1,444,048) ($1,409,056) ($1,774,819) ($1,519,848)
Interest expense (245,070) ($291,902) ($277,181) ($192,264) ($78,578)
Subtotal (2,240,407) ($1,735,950) ($1,686,237) ($1,967,083) ($1,598,426)
Net Cash $664,334 $1,093,875 $436,003 $2,070,527 $706,837
DD&A ($389,666) ($437,079) ($426,898) ($462,685) ($304,965)
Share-‐based compensa1on ($180,923) ($116,313) ($196,223) ($162,528) ($197,220)
Re1rement liability ($142,194) ($137,266) ($108,178) ($1,112,109) -‐-‐
Subtotal ($428,395) ($690,658) ($731,299) ($1,737,322) ($502,185)
Net Income $235,939 $403,217 ($295,296) $333,205 $204,652
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
2004 2005 2006 2007 2008 2009 2010 2011
Lifting Costs*
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
2004 2005 2006 2007 2008 2009 2010 2011
Oil Revenue
-$1.0
-$0.5
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
2004 2005 2006 2007 2008 2009 2010 2011
Cash Flow From Operations
Consistent Growth in Results
($M) ($M)
($/Bbl)
($M)
7
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
2004 2005 2006 2007 2008 2009 2010 2011
Capital Expenditures *2011: $18/bbl lifting costs with no disruption of production.
Ventura Basin California
Steam flood exploitation project (Yule Zone) Sefton controls 262 gross and net acres 100% WI and 90% NRI 19 wells on production making ~150 BO/d Cyclic steaming throughout 2012 5 remaining infill locations OOIP 11 MMBO 2.5-acre spacing with 1-acre down-spacing
potential
1 mile N
Tapia Field
Development exploitation project (marine/miocene Sandstones)
Sefton controls 1,510 gross and net acres 100% WI and 83.3% NRI 4 wells on production making ~10 BO/d 2 remaining infill locations At least one wildcat well, from geology/geochem data 27° API sweet crude
Eureka Canyon Field
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----- JV & Acquisition
Targets
Tapia Steam Flood Analog
Tapia Oil Field
Rugged canyon drilling targeting Yule Oil at depths of 1,100’ Estimated OOIP 11 MMBO with 50% current estimated recovery; ultimately 65% -
70% via full steaming program Minimum surface disturbance and multiple-well pads Received state award for clean up of acquired assets and ongoing care and
maintenance of new and existing wells and surface facilities Prices currently being received are at a premium to NYMEX light sweet 17° - 19° API Gravity Crude
Hartje # 18 Well- Tapia
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Tapia Field Economics
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Working Interest: 100%
Net Revenue Interest : 90%
Completed Well Cost: $850,000 to tanks
Well-head Oil Price: $100.00 Bbl @ wellhead
API°: 17-19
Operating Costs: $18.00 Bbl
Production Taxes: 6% - $6.00 Bbl
Trucking: Offset by quality adj.
Royalty: $6.50 Bbl
G&A $36 (@150 Bopd)
Total Deducts $66.50
Net Back: $33.50 Bbl
Gross Reserves/well 140 MBO (assuming 50% rec.)
Net Reserves/well 136 MBO
Bbls
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
Primary Recovery
Cyclic Steaming
Steam Flood
Total EUR High Case EUR*
21.7% of OOIP
13.3% 15.0%
50.0%
Up
to 7
0%
* High case dependent upon steam response
Per-well EURs Type Well Assumptions
Third Party Engineering (on 50% of OOIP)
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Initial Tapia Development
Continuous Steam Forecast
Current Production
Tapia Acquired
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Engineer’s steam forecast uses a conservative estimate of 50% ultimate recovery of original oil in place
Production Forecast Production Forecast
Yule Sand Structure – Tapia
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• 5 Infill Locations
1
2 3
4
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Pre-Petrel Geologic Model
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Dr. Farouq Ali / Petrel – Tapia
• Geologic & Engineering Model has 50 layers and 500,000 grid cells
• Each grid cell contains detailed engineering values that are modeled in the steam simulation
• Drilling program locations are a good fit with modeled engineering parameters
• Currently undergoing upgrade based on data from new wells drilled
Well not drilled (Hartje #20)
PROPOSED MINIMUM Q4 – 2012 DRILLING PROGRAM
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Dr. Farouq Ali / Petrel – Tapia
CROSS SECTION THROUGH THE TAPIA FIELD SHOWING OIL SATURATED SANDSTONE DISTRIBUTION ACROSS THE OILFIELD
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A method of Enhanced Oil Recovery (EOR) where steam is injected into dedicated wells and heated oil is effectively moved to surrounding oil producers
Also called steam-drive Heat from steam and pressure from injection dramatically increases oil
mobility in the subsurface Oil recovery is commonly double that of primary methods (pumping only)
– but can be much greater
Dr. Farouq Ali - HOR Heavy Oil Recovery Technologies, Ltd
Recognised as a world-wide expert in Thermal Enhance Oil Recovery methods
Has examined / designed oilfield steam applications for over 200 locations including many in California
Completed initial study for application of steam flood at Tapia Oilfield Currently completing refined steam simulation modeling and steam flood
design for Tapia
Steamflooding
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Pilot 1 CYCLIC STEAM
3-step process on a single well
Pilot 2 CONTINUOUS STEAM One dedicated injector serving multiple surrounding producers
Full-Field Steamflood* Design by Dr Farouq Ali
(Steam doubles ultimate oil recovery)
* FINAL STEAMFLOOD DESIGN AND VIABILITY TO BE BASED ON PENDING STUDY AND REPORT BY DR. FAROUQ ALI
Thermal Oil Recovery
Forest City Basin Kansas
Los Angeles County
CBM and conventional oil and gas potential Shallow horizons Sefton controls 43,000 gross and net acres 100% WI and 87.5% NRI Net coal thickness exceeds basin average Midstream infrastructure: SER controls 22
miles of pipeline and 10MMCFD gas plant
Anderson and Franklin Counties
CBM and conventional oil and gas potential
Shallow horizons shut-in due to lack of infrastructure
Sefton controls 7,000 gross and net acres
100% WI and 87.5% NRI
Targeted acquisition potential
Midstream infrastructure: SER controls 50 miles of pipeline (Vanguard, LAGGS)
Leavenworth County
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19
Leavenworth Midstream
26 miles of pipeline
Access to interstate pipelines/potential gas storage
Third-party gas can be transported
Vanguard Pipeline
Major Interstate Pipeline
LAGGS Pipeline
20 miles of pipeline Access to interstate pipeline Adjacent wells being acquired Potential for Sefton equity gas and third party gas transport
LAGGS
Cholla Assets
Gas Storage Facility
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Leavenworth Upstream
Primary objective: conventional oil & gas
Secondary objective: CBM
Both exploration and acquisition (local) opportunities
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Kansas Exploration & Development
IDENTIFICATION OF PROSPECT DRILLING TARGETS USING 3RD ORDER RESIDUAL ANALYSIS (LEAVENWORTH)
1
2
3
Present Day Structure Map
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Kansas Exploration & Development
3RD ORDER RESIDUAL MAP
Maps paleo-surface
Identification of productive wells in relation to surface
Geologist correlates with reservoirs
Results in acreage acquisition, high-grading & prospect development
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Kansas Prospects Mississippian Erosional Surface
Identified by “3rd order residual” mapping
Multiple drilling objectives - 3 types of hydrocarbon trapping mechanisms
Proven reserves for each trap type in eastern Kansas
Current mapping shows many similar prospect corollaries in proximity to Sefton’s pipeline system
Mississippian Erosional Surface
Buried Hills
Channel Sands Truncation
Traps
Wehking Gas FIeld
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Type log demonstrates both conventional gas and multiple CBM targets in this play.
CBM often overlooked
Multiple wells for re-completion
Similar plays indicated in the area
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Wehking Project - Production Curve
Production curve identifies conventional and CBM gas production in project
McLouth (conventional gas) not depleted in all wells
Some wells were never recompleted in the coals at all (CBM left behind)
Some wells did not complete all coals – excellent secondary recompletion potential
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McLouth GasGas
CBM Gas
Prematurely Shut-in
Actual decline is expected to be much shallower (long lived reserves in CBM)
Anderson/Franklin Counties
Major Pipelines
Acquired Pipeline & Facilities
Major Oil Fields
Primary objective: CBM
Secondary objective: shallow underlying oil fields
Owns 22 mi. of pipeline system (Waverly), and a 10 mmcf/day gas processing facility
Access to major pipelines
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Sefton Reserves & Resources Summary (31/12/11)
Reserve Category Oil (MBO) Gas (BCF) Undiscounted $
(MM) PV10 $(MM)
Proved Developed Producing (PDP) 436 0 $25.195 $15.422
Proved Developed Non-‐Producing (PDNP) 1,224 0 $88.552 $50.986
Proved Undeveloped (PUD) 2,077 0 $158.911 $71.359
Total Proved (P1) 31/12/11 3,738 0 $272.658 $137.767*
Possible (March 2012 -‐ Leavenworth) 0 0.53 $1.930 $1.020
Total Possible (P3) 0 0.53 $1.930 $1.020
Resources Category
Con1ngent (March 2012) 0 38.02 $116.480 $27.530
Prospec1ve (March 2012) 1,970 17.23 $137.870 $87.520
1,970 55.25 $254.350 $115.050
Grand Totals 5,708 55.78 $528.938 $253.837 *US GAAP price of $102.00 per barrel as of 31/12/11 (average price for the preceding 12 months)
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Value Summary* (31/12/11) • Oil: 5708 MBO • Gas: 56 BCF
• Total undiscounted value • Total PV10 value $529 million $253 million
* US GAAP price of $102 per barrel as of 31/12/11 (average price for the preceding 12 months).
Sefton Reserves & Resources
2012 Outlook
California
Corporate
Kansas
Grow cash flow through developing existing assets - 2012 Strengthen balance sheet - 2012 Utilize outside capital sources for core area growth and acquisitions – 2012 and beyond Improve I.R. program – 2012 and beyond
Tapia: Increase production through drilling, cyclic steaming, and design full steamflood – 2012 and beyond
Eureka: Identify farm-out candidates for deeper pool test and infill wells - 2013 Pursue regional JV opportunities – 2012 and beyond Bolt-on acquisitions – 2012 and beyond
Leavenworth Project: Consolidate regional pipeline assets - 2012 Activate acquired pipelines - 2012 Aggregate Sefton and third-party production – 2012 and beyond Geologic studies/leasing program – 2012 and beyond Anderson County: Evaluate CBM and conventional oil and gas exploitation - 2012 Evaluate midstream assets for gas-gathering opportunities - 2012 Geologic studies/leasing program – 2012 and beyond Bolt-on acquisitions – 2012 and beyond
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Summary
• Undervalued oil assets
• Gas interests give further value upside
• Diversified asset base with prudent oil/gas mix
• Big growth potential based on the current assets alone
• Asset independently valued at £178m (vs. £10m market cap)
• Utilize outside capital for core area growth and acquisitions/ mergers
• Comprehensive IR program to get this message to investors
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Contact
Corporate Headquarters London Office Jim Ellerton, Chairman of the Board Jim Ellerton and Michael Green Karl Arleth, Non-executive Director City Business Centre Bill Brand, Financial Consultant 2 London Wall Buildings Sefton Resources, Inc. London Wall 2050 South Oneida St. London Suite 102 EC2M 5UU Denver, Colorado USA 80224 Tel: +44 (0) 207 448 5111 Tel: +1-303-759-2700 Fax: +44 (0) 207 448 5222 Fax:+1-303-759-2701 Email: [email protected] Website: www.seftonresources.com
Brokers Nomad Richard Hail, Fox-Davies Capital Richard Hail, Fox-Davies Capital Tel: +44 (0)20 3463 5000 Tel: +44 (0)20 3463 5000
Clive Mattock, Dowgate Tel: +44 (0) 129 351 7744
Investor Relations Financial Public Relations Dr. Michael Green, Investor Relations Consultant Alex Walters, Cadogan PR Tel: +44 (0) 785 573 4970 Tel : +44 (0) 207 839 9260
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Appendices
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Tapia Topography
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Field Shots
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Steaming Unit Specs
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Water is sourced at the field
Meets strict LA AQMD emissions requirements
Custom unit built in 2007 by Clayton Industries
Rated at 14,290,000 BTU per hour
Self-contained PLC / safety controls
Equipped with a low NOx burner
Trailer mounted for multiple location use
Facilities for cyclic steaming and associated production increases in place
Flexibility to choose steam-generation fuel source based on price and availability for uninterrupted steam flood activities
– Utility gas – Propane – Lease gas (Sefton production)
Production Operations
DOGGR Operator Award 2009, 2010 and 2011
Facilities for cyclic steaming and associated production increases in place
Flexibility to choose steam-generation fuel source based on price and availability for uninterrupted steam flood activities
– Utility gas – Propane – Lease gas (Sefton production)
Upgraded Facilities
Multi-well Pad Drilling Minimizes Surface Impact
Steam Unit
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Tapia – Snow #3 Log
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Yule Sand
Tapia Oil Field
1 The well is drilled
through the oil zone & casing
pipe is cemented in place.
2 The oil zone is
under-reamed to 12” to 14” to allow
for an effective filter pack.
3 A stainless steel
wire-wrapped screen is placed in the oil productive
well bore.
4 Uniform gravel is pumped into the annular space
between the screen and formation sand
5 The gravel and screen allow the oil and gas to produce into the well
while filtering out formation fines.
Oil-saturated sandstone
shale
Typical gravel-pack filter screen completion as used on new oil wells Process reduces workovers, increases recovery/reserves and lowers costs
shale
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Eureka Canyon Field
Development exploitation project (marine/miocene Sandstones) Sefton controls 1,510 gross and net acres 100% WI and 83.3% NRI 4 wells on production making ~10 BOE/d 2 remaining infill locations At least one wildcat well (Deeper Pool) 27° API sweet crude Geochem data acquired
39
Eureka Canyon Field
AREA OF HISTORICAL OIL PRODUCTION SHOWING
DEPLETION
AREAS OF STRONG EXPLORATORY
POTENTIAL
PHASE 1 AREA NOT ENHANCED BY PHASE 2 SURVEY
0’ 2500’ 5000’ 7500’ 10000’
Phase 2 Infill Survey
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Assets
TEG MidContinent acquired a 22 mile pipeline and a gas gathering/water disposal system, including 17 inactive wells and 2 salt water disposal wells in 2009
In addition, the acquisition provides sales outlet, a 10 MMcf /d processing facility and a “tap” into Quest’s pipeline which provides TEG MidContinent with access to major gas markets
Petro Waverly (Anderson Co., KS)
Midstream infrastructure: SER controls approximately 50 miles of inactive pipelines
Access to major gas markets Gathering and transportation for 3rd party
gas, Sefton equity gas Opportunity for exploration joint ventures
Vanguard/LAGGS/Cholla (Leavenworth Co., KS)
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Jim Ellerton, Chairman and Founder
AIM: SER
